Cryptocurrency mining: Guide to the ‘easier said than done’ process

• Cryptocurrencies are brought into circulation via cryptocurrency mining, which is not as easy as it sounds. Difficulties and complexities have a space in cryptocurrency mining too.
• Specific parameters like favorable weather conditions, lenient regulatory framework, etc., are to be kept in mind, especially for the new people in the industry.
• Here are some currently profitable coins and countries to consider while considering to begin mining cryptocurrencies.

Cryptocurrencies are digital assets acting as an alternative to fiat currencies in the current times. They facilitate peer-to-peer, borderless transactions and smart contracts on the web in a decentralized way. They solve the double-spend problem and eliminate the need for an intermediary. Cryptocurrencies record the transactions on a public ledger called Blockchains. But how exactly are these cryptocurrencies brought into circulation? It’s done through a process called cryptocurrency mining. They are not printed like banknotes. They can only be generated digitally via computing power.

What is Mining?

Mining is a process by which new coins are entered into circulation. It facilitates the introduction of new cryptocurrency units, for instance, Bitcoin. It is how transactions are confirmed on the network and are critical for the maintenance and development of blockchain ledgers. The process of altering the shared ledger with a newly added transaction in which all the core supporters synchronize the copies is what we call cryptocurrency mining. These core supporters are known as miners.

How does the cryptocurrency mining operation work:

There are many ways by which miners on the peer-to-peer network can arrive at a consensus on the status of the shared ledger. 

If we talk about the leading currency, Bitcoin, the consensus mechanism used is Proof-of-work(PoW). It involved computers participating in doing some work while trying to find the value the algorithm defines. Every miner takes the number of transactions submitted by users in around ten minutes and creates a block. They compute the data from the transactions in the block to find the value designated. The miner who finds the value first, contributes to adding the block on the ledger (the next block). And every other miner would coincide their copy of the ledger to include it. This process repeats every time a miner wins.   

The winner gets the number of coins he assigned for himself in the block. And this amount is what we call a mining reward. 

Difficulties that the miner might witness: 

• The hash power or the network’s computing power is increasing rapidly, increasing the difficulty and competition among the miners.
• The halving of cryptocurrencies takes place every four years, in which the reward is lessened to half of its previous value. 
• Costly: The computation of the transaction data, known as the hashing process, consumes a lot of energy, and paying for it becomes costly depending upon the country in which it is carried out. Cheap and sustainable energy requirements are a must.
• The competition increases over time, which demands upgraded mining equipment. To stay quick, profitable, and efficient, one needs the most advanced technology for their mining operations. 
• Mining has become a capital-intensive business over time, requiring heavy investments and sourcing efficient energy, locations, and supplies to keep costs lower.
• Not all countries are crypto-friendly; for instance, China banned the asset class and  cryptocurrency mining last year.
• The Crypto industry is a volatile one where a single Tweet can influence the prices of digital assets. Surviving the price drops and waiting for the next price strike demands more efficiency with the operations.
• The technologies and the industry are still in their early stages with no proper precedents from the past; hence, having thorough knowledge and information is essential for the newbies in the ever-evolving industry. 

Digital assets that are most fruitful to mine currently:

1. Ethereum(ETH): Ethereum, the second topmost currency, is currently the most profitable to mine. Mining Ethereum might offer an estimated reward of 0.0012 ETH. It can offer 100% profitability with a revenue of $3.87.

2. Firo(FIRO): Mining Firo can generate $2.99 with profitability of around 77%.

3. Ethereum Classic(ETC): Mining this hard fork of Ethereum has current profitability of around 62% with a revenue generation of $2.39.

4. Ravencoin(RVN): Mining ravencoin currently has 61% profitability, with $2.36 revenue.

5. Ergo(ERGO): The mining of Ergo coins can offer profitability of 56% and a revenue generation of $2.17.

Top five favorable countries to be considered for your cryptocurrency mining operations:

The factors to be considered:

• The energy consumption that cryptocurrency mining does. Sometimes, the amount of energy the mining consumes can provide electricity to a small country like Switzerland.
• The amount of heat that a mining setup emits becomes another concern for environment lovers.
• Countries with readily available and cheap electricity are better, making the operation cost-effective.
• Government rules, regulations, and policies are vital factors to be kept in mind while choosing a region for your operations.

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United States:

If there’s a country with the extreme effect of China’s ban on mining digital assets, it is the United States. The country became the hashrate capital of the world as the miners from China fled to other countries for their operations. The hashrate witnessed a surge of around 428% in comparison to September 2020, says statistics. For instance, Texas and New York witnessed a significant increase in mining activities after the Chinese crackdown. 

Iceland:

This small island nation has an abundance of affordable energy through the country’s geothermal and hydroelectric energy. Cryptocurrency mining equipment requires large amounts of energy, and the heat emission is relatively high. Hence, a cool country like Iceland proves great for cooling down the mining setup. Apart from this, it has a strong tech scene, friendly regulatory environment, and the presence of venture capital makes it a favored location for mining.

Russia:

Russia has a global mining hashrate of around 11.23%. The country has positioned itself to be Bitcoin mining friendly. The subsidized energy, especially in the Siberian region, along with a cool climate, places it among the countries to seek for mining.

Canada:

The hydroelectric plants in Quebec have become an attractive energy source for miners. Canada is another country witnessing an operations surge after the Chinese crackdown. China also offers a cool climate and favorable regulatory framework. 

Greenland:

Another island nation with an icy and cool climate might prove to be a good option for crypto mining operations. 

Over a decade ago, people could mine Bitcoin through their devices at home itself. They could simply bring together a set of gaming PCs, but now it’s not the same. Comparatively, people now need a more advanced mining setup, which in turn needs cost, strength, and time of the miners. A powerful setup can facilitate a miner with profits. Now, people can also use profitability calculators like Nicehash to determine whether mining equipment would result in profits or not. As the digital assets are gradually making a place in the global financial system, the mining operations are increasing rapidly, facing ups and downs from time to time.

Nancy J. Allen

Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.